I need to Liquidate my Limited Company?
Liquidating a limited company involves the permanent closure of the entity, whether solvent or insolvent.
The limited company will no longer exist as soon as removed from the Companies House (“struck off”) register.
Whether your limited company is insolvent or solvent, you will need a licensed insolvency practitioner to liquidate your limited company.
The liquidation process involves requiring a licensed insolvency practitioner to distribute assets to company creditors in order of rank.
Additionally, the appointed liquidator is obliged to investigate the company’s former management by the directors and submit a confidential report in all cases, no matter how small the limited company was.
Companies considering liquidation should be aware that the liquidator must examine the behaviour of directors in the period before insolvency.
The liquidator will seek evidence of direct misconduct in the company before their appointment in all cases, no matter who is appointed. They particularly look for evidence of wrongful trading. If proven, company directors risk disqualification from serving as a director for up to fifteen years.
Three types of liquidation:
I need to Liquidate my Limited Company?-The process of liquidation?
- Establish your limited company is insolvent.
- Engage a Licensed Insolvency Practitioner, like HBG Advisory, to help, then
- The liquidator calls a meeting of members of the limited company to vote on a ‘winding up resolution’. A legal procedure allowing the company to commence liquidation. However, by value, 75% or more of the members must vote yes to pass the resolution.
- However, a written resolution may opt to wind the company up, involving a resolution sent to shareholders requiring a signature and return. As with the first option, a majority of 75% needed in resolutions returned, allowing liquidation of the company.
- Once the winding-up resolution passed, the Insolvency Practitioner acts as a liquidator, who realises company assets into cash for distribution in rank order to the company’s creditors.
Liquidating a Solvent Limited Company using a Members Voluntary Liquidation MVL?
- Validate your limited company has £25,000 net assets or more. If lower, you may apply to strike off your company, subject to HMRC agreeing.
- Arrange a Shareholders Meeting to vote on the formal winding up of the company.
- Retain an Insolvency Practitioner.
- The liquidator assists directors in preparing a Declaration of Solvency. An official document requiring signature by company directors, confirming the company can repay all its debts (including interest) within 12 months of the signature date. This document requires a signature by a director in the presence of a solicitor or commissioner of oaths. Then send your signed declaration to Companies House within 15 days of passing the resolution.
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- The IP liquidates all assets of the company.
- Pay the proceeds to the company members.
Cost to Liquidate a Limited Company?
Liquidating, a limited company in England and Wales depends on the size of the company. What are its debts and the complexity of the case?
A small limited company with little or no assets, then fees start at £3000. However, as companies grow in size, involving:
- Complex finance matters.
Then fees increase as they involve additional time.
However, do not panic. Fees usually may be recovered by the appointed liquidator from asset sales, not involving any further payment by company directors.
Additionally, directors paid on the PAYE scheme may qualify for redundancy, which they may use to pay the initial payment.
Are Employees of the Liquidated Company Paid?
Employees, including directors, on the payroll, qualify for certain statutory redundancy payments when a company becomes insolvent.
Former employees of the company owed;
- Wage arrears;
- Holiday pay;
- Statutory notice pay;
- Redundancy payments;
- Unpaid pension contributions and
- Maternity pay.
Can expect payment from the National Insurance Fund. It distributes funds when redundant employees cannot claim their full entitlement from their insolvent employer.
Redundant employees claim through the Redundancy Payments Service (RPS), a division of the Insolvency Service, and initially dealt with by the liquidator.
When to commence a voluntary liquidation?
Voluntary liquidations typically take one year to conclude. However, if the limited has considerable assets, including land or substantial premises, then the realisation of these assets may hold the completion of the liquidation.
Appointing a liquidator (insolvency practitioner) requires only one or two weeks. Approving the liquidation takes about three months. However, the IP’s role is to get the best return for the creditors of the company, so it may take considerably longer to:
- Evaluate the company’s financial position;
- Value and then realise any company assets, and
- Allocate the proceeds to creditors.
I need to liquidate my Limited Company? – The duties of the liquidator
The appointed liquidator of a limited company is an authorised insolvency practitioner or official receiver who runs the liquidation process.
Once appointed, they assume control of the business.
- Settling legal disputes or contracts outstanding;
- Organise the realisation of the company’s assets, with third party valuers, to enable distribution in rank to creditors of the company;
- Maintain regulatory paperwork and deadlines;
- Inform creditors of the company on matters while involving them in decisions if required;
- Examine the company directors and prepare a confidential report on the failure of business;
- Pay creditors;
- Pay ongoing costs of liquidation costs;
- Complete and file final VAT bill;
- Finally, remove the company from the companies register.
Importantly, liquidators act in the interest of the company creditors once appointed in a creditor voluntary liquidation.
Re-using the former limited company name
Suppose you’d been a director of a liquidated company. In that case, you may not for five years form, manage or promote a limited company with a similar or identical name as your liquidated company, including the registered name of the company and any trading names.
- Court permits you to use the former name;
- When a licensed insolvency practitioner sells the business, along with giving the legally required notice;
- You have used the same name in another company for a year or more, along with the liquidated company.
Winding up a Limited Company With No Assets or Debts?
When a limited company has no liabilities or assets, it may be feasible to strike off the company. Read more about company strike off.
What if I can’t afford to liquidate my Limited Company?
Not a problem!
The liquidator’s fees remain taken from the realisation of assets. Assuming the company has some assets, you could use a firm of insolvency practitioners, including HBG Advisory. Agreed fees for the liquidation. Remain paid from company asset realisation, as the liquidator, is considered a preferential creditor.
Fear of commencing a liquidation, primarily due to its cost, company directors often risk a compulsory liquidation initiated by HMRC. In this situation, company directors lose control over appointing their IP.